Explain bitcoins/mining to a dummy (bortz)

[BORTZ]

Someone here at work got a "miner" and tired to explain it to me and I just looked at him like a retard. He got fed up with me and I tried to Google it. I'm so confused. What are they, why do I need a little usb dongle to mine them, what does mining even mean and what are they good for lol.

 

[raulpica]

It's pretty much useless to get into nowadays except if you buy one of those newfangled ASIC Miners (they're specialized processors in boxes which connect with USB to your PC), since those are SO powerful that they've ramped up the overally difficulty (in order to let everyone get bitcoins, the system autoregulates itself in the difficulty it gets for you to get a single coin).

It's pretty complicated stuff, if you want to understand all of it: http://www.tomshardware.com/reviews/bitcoin-mining-make-money,3514.html

What good are they for? You can sell a single coin for a BOATLOAD of money. Currently it sells at $255 a piece.

Don't think that you can get into it and get rich, though. You need to have a LOT of money to invest (specialized hardware galore).

 

[Foxi4]

In other words, bitcoins are a virtual currency which spun out of control and now has a real-world value... for some reason.

 

[FAST6191]

In other words, bitcoins are a virtual currency which spun out of control and now has a real-world value... for some reason.

"real world value" is a tricky term to try to define if you are wearing your economist hat. Either way they were always intended to be able to be converted to more common/non virtual currencies.

As for the OP. We had a thread on them http://gbatemp.net/threads/bitcoins.352291/
Generally they are a kind of money that stops itself being infinite by virtue of similar maths to that which is used in cryptography making finding (otherwise known as mining) new coins a harder mathematical problem that needs processing resources (originally CPUs, then graphics cards, then FPGAs and now we are seemingly on ASICs and beefier FPGAs) to find them at a competitive level (though competitive depends upon your meaning as you still have to buy the mining gear in, whatever it may be, and power it which may also not be the cheapest), a type of problem that only gets harder as time goes on/more coins get found.
As they are also really damn hard (are you signals intelligence for a big country? even then you probably hope the people using them screw up somewhere else) to trace back to real world ownership and monitor where payment goes to and from they also gained some favour among those trading for less than squeaky clean items. You can also dodge a lot of bank fees for money transfer (you are sending a little bit of data), invest in them as the price has generally been seen to rise ( http://bitcoincharts.com/charts/mtgoxUSD#tgSzm1g10zm2g25 ) at a faster rate than most other investments and even use them in a few real world places ( http://www.theregister.co.uk/2013/09/16/australian_pub_to_serve_beers_for_bitcoin/ http://www.theregister.co.uk/2013/06/25/bitcoins_now_accepted_in_hitech_hipster_hostelry/ ).

There are serious flaws with the system which you can watch any number of videos on ( http://www.youtube.com/user/ChRiStIaAn008/search?query=bitcoin ), various countries including your own have questioned the legality of the system as a whole (though nothing has really yet come of it) and many of the places are now geared up to make it hard for you to play effectively but go for it if you want. The usual rule of investment applies and you should never invest whatever you can not afford to completely lose.

 

[Veho]

In other words, bitcoins are a virtual currency which spun out of control and now has a real-world value... for some reason.

Foxi doesn't trust currency that can't be melted down into materials of equal value. Do you know how long it took him to get used to paper money?

 

[raulpica]

Foxi doesn't trust currency that can't be melted down into materials of equal value. Do you know how long it took him to get used to paper money?

Last time I heard, he was trying to barter PSVitas for food.

 

[Foxi4]

Foxi doesn't trust currency that can't be melted down into materials of equal value. Do you know how long it took him to get used to paper money?

I'll have you know that coinage was introduced in Poland in the second half of the 10th century, back when Croats still traded chickens and Byzantine coinage replicas.

 

[Veho]

Croats still traded chickens and Byzantine coinage replicas.

They were marten pelts, you uneducated peasant

 

[Foxi4]

They were marten pelts sexual favors, you uneducated peasant

I see. Fair enough.

 

[Veho]

I see. Fair enough.

It is the universal currency, after all

 

[Gahars]

"Bortz learns about Bitcoins"

 

[BORTZ]

Generating currency from computing power...

Am I the only one who doesnt get this lol

 

[Fishaman P]

I don't see why it has real value, but it does. Just go with it.
Or rather, don't. GPU mining uses more money in electricity than it makes, even with a super-efficient GPU and cheap US electricity.

 

[Joe88]

would a littlefe be good for mining ?

 

[Qtis]

An interesting read in the subject was posted at Ars Technica this summer with the review of the Butterfly Labs miner hardware.

Biggest problems ares fluctuating BTC rates and costs of mining. When more and more people start mining, the odds of getting anything become lower. If prices happen to drop suddenly (this has happened a couple of times already), you may end up needing to wait to get the profits. Still it's easily profitable, if you know what you're doing (and manage to get the hardware), but it requires a bit of investing in the beginning.

 

[p1ngpong]

Generating currency from computing power...

Am I the only one who doesnt get this lol

Basically bitcoins are highly encrypted mathematical algorithms. They are pretty much impossible to crack or hack so the only way to unlock a bitcoin is to have a computer "mine" bitcoins by solving the algorithm. The effort it takes to mine one bitcoin is what gives them a real world value as it takes a lot of computer hardware, electrical power, time and so on to mine one. Because each bitcoin is unique and can not be copied or forged it is as secure a currency as dollars and gold.

 

[Harsky]

So... I can't hook up my Pentium 4 PC, run a magical program and receive monies?

IT HAS 256MB RAM. SURELY I CAN MAKE IT RAIN WITH THAT AMOUNT OF POWER.

 

[Flame]

So... I can't hook up my Pentium 4 PC, run a magical program and receive monies?

IT HAS 256MB RAM. SURELY I CAN MAKE IT RAIN WITH THAT AMOUNT OF POWER.

the amount of money you spend on the power(electricity), you will lose money not make money with that setup. (which i understand)




but the thing i don't understand is whats the best way to convert my real money into Bitcoin?(which i dont understand)

 

[Tom Bombadildo]

the amount of money you spend on the power(electricity), you will lose money not make money with that setup. (which i understand)




but the thing i don't understand is whats the best way to convert my real money into Bitcoin?(which i dont understand)

You don't necessarily convert your own money to Bitcoins. Well...I mean, you can buy Bitcoins with your money, but that's silly seeing how the value of 1 Bitcoin is ridiculously high. Bitcoins have an exchange rate, just like every other currency (like 1EUR is worth approximately $1.30 USD), and in this case 1 Bitcoin = approximately $255 USD.

Do note there are a limited number of bitcoins that can be mined, it isn't an unlimited source of "money". IIRC the number is like...21 million or so, and we're currently around 12 million bitcoins mined. Once we hit the cap, people predict Bitcoins will have a more stable exchange rate.